Yen about to mark biggest weekly loss in 2025 amid trade chaos

The Japanese yen declined in Asian markets on Friday, resuming its losses after a two-day pause against the US dollar, edging closer once again to its lowest level in two weeks. The currency is now on track for its largest weekly loss in 2025, amid escalating chaos in global trade as Donald Trump announced further tariffs.

Despite rising expectations of a rate hike by the Bank of Japan at its late-July meeting, markets remain focused on upcoming key economic data from Tokyo, including figures on inflation, wages, and unemployment in the world’s third-largest economy.

The Price

– Yen exchange rate today: The dollar rose by 0.55% against the yen to ¥147.04, up from the opening rate of ¥146.23, after hitting a low of ¥146.13.

– On Thursday, the yen posted a marginal gain of less than 0.1% against the dollar, marking its second consecutive daily gain as part of a rebound from its two-week low at ¥147.18.

Weekly Performance

Over the course of this week—which officially concludes at Friday’s settlement—the yen is currently down about 1.75% against the US dollar, putting it on track for its steepest weekly decline of 2025.

Trade Turmoil

Global trade turbulence has intensified after US President Donald Trump announced a new wave of tariffs, stating his intention to impose broad 15% to 20% tariffs on most of America’s trading partners.

Trump announced a 35% tariff on goods imported from Canada. In a message posted on Truth Social, he informed Canadian Prime Minister Mark Carney that the new tariffs would take effect on August 1 and would increase further if Canada retaliated.

Trump also stated on Thursday that the European Union may receive a formal tariff letter by Friday, raising doubts about the progress of trade talks between Washington and the EU.

Brazilian President Luiz Inácio Lula da Silva said he hopes to find a diplomatic solution to Trump’s threat of a 50% tariff on Brazilian imports, but vowed to respond in kind if the tariffs go into effect on August 1.

Comments and Analysis

– Francesco Pesole, FX strategist at ING Bank, said markets are still digesting the recent tariff surprises, but there’s hesitation in trying to predict Trump’s next move.

– Pesole added: “I believe the general consensus still holds that Trump won’t impose new tariffs on China and will likely reach an agreement with the European Union.”

Japanese Interest Rates

– Last week’s data from Tokyo showed household spending in Japan rose by 4.7% year-on-year in May, marking the fastest pace since August 2022. The result far exceeded market expectations of a 1.3% rise, after a 0.1% decline in April.

– Following the data, market pricing for a potential 25-basis-point rate hike by the Bank of Japan in July increased from 40% to 45%.

– To reassess those odds, investors are now awaiting further data on inflation, unemployment, and wage growth in Japan.